Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Bank failures come in waves

yarn.pranshum.com

Post reply on HN
Print view View original

121–130 of 259 posts

Re: Bank failures come in waves

#121

Post by nkuttler »

vishnugupta wrote: post #95

Continuing the theme of the article the current banking crisis has exposed two conflicting functions of money i.e., store of value and a vehicle of investment both of which are facilitated by banks. Keeping money safe, whether physically or digitally, comes at a cost. Banks absorb this cost because they make money through credit creation, maturity transformation, and interchange fees. They even pass on some of that p…

> I think this crisis is the strongest yet reason to push for CBDCs as only a central bank can fully guarantee a deposit

This makes zero sense. A CBDC doesn't have a stronger "guarantee" than normal central bank money, yet it has all kinds of negatives like total surveillance and control.

Re: Bank failures come in waves

#122

Post by s_dev »

zizee wrote: post #41

From what I understand, when someone takes out a loan, a bank doesn't lend out depositors' money. Instead money is "created" by the bank (on behalf of the fed), and the bank needs to pay the fed interest. The bank also needs to pay the loan back by an agreed uppn time (which destroys the money). Why can we not have a similar system for deposits? A bank takes a deposit, the fed "destroys" the money, but pays interest…

>The bank also needs to pay the loan back by an agreed uppn time (which destroys the money).

Perhaps you can clarify by what you mean by 'destroyed'.

To my knowledge once the bank has 'created' the money it will always exist in the system. However it has devalued all other money by a small amount which we understand today as 'inflation'. So it's not clear to me what you mean by destroyed.

Re: Bank failures come in waves

#123

Post by madsbuch »

sgsag33 wrote: post #90

Why do we even need banks? If they make money by lending money that mostly belong the people (state/feds) anyways, I guess we all would be better if banking was just a state monopol. I guess I'm just missing some points here so maybe someone can help and explain me why this is a bad idea?!

In my understanding, the role of banking is to take on the intrinsic risk when doing money allocation.

1. The central banks control supply (by controlling their interest rates)

2. The banks allocate resources (lending out with a risk premium)

3. Consumers and entrepreneurs use the money for value creation.

To me it seems like banks ought to be able to fail. The problem is that banks have gotten the responsibility of the money infrastructure (the cash to e-money transition) which we can not afford to fail.

We should lift the money infrastructure responsibility of banks.

Re: Bank failures come in waves

#124

Post by dsfyu404ed »

vishnugupta wrote: post #95

Continuing the theme of the article the current banking crisis has exposed two conflicting functions of money i.e., store of value and a vehicle of investment both of which are facilitated by banks. Keeping money safe, whether physically or digitally, comes at a cost. Banks absorb this cost because they make money through credit creation, maturity transformation, and interchange fees. They even pass on some of that p…

>CBDC: If you want safe custody of your money.

Not safe from the moralizing pricks (of which there is a surplus in our midst) who the executive or legislature will inevitably try to cozy up to by stealing my money on the basis of some attribute or box that I check.

Re: Bank failures come in waves

#125

Post by [deleted] »

i67vw3 wrote: post #119
kzrdude wrote: post #106

Earlier quoted context omitted.

In the US there used to be the Glass-Steagall Act "effectively separating commercial banking from investment banking"; established in 1933 but it was partly repealed in 1999.

Could the Glass-Steagall Act prevented the 2008 banking crisis?

[deleted]

Re: Bank failures come in waves

#126

Post by nkuttler »

MichaelMoser123 wrote: post #105
unsupp0rted wrote: post #43

What’s the purported bad assumption during the current wave? That interest rates would never rise?

that's what he is saying after the slides Is there another bad assumption today? The recent failure of Silicon Valley Bank has raised fears of a new banking crisis. One way to look at SVB's failure is: SVB assumed that interest rates won't rise. what i don't understand: how did they handle the banking crisis of the eighties? Somehow that one didn't manage to kill the economy, how?

My guess is less concentration, debt and leverage in total. We seem to have progressed to a point where the entire system is very unstable and always at risk, and the only tool we seem to have left is creating more debt/money. Our modern fiat money is one of the greatest experiments in human history, and we have no evidence yet that such a system can be stable long term.

Re: Bank failures come in waves

#127

Post by rjtavares »

i67vw3 wrote: post #119
kzrdude wrote: post #106

Earlier quoted context omitted.

In the US there used to be the Glass-Steagall Act "effectively separating commercial banking from investment banking"; established in 1933 but it was partly repealed in 1999.

Could the Glass-Steagall Act prevented the 2008 banking crisis?

We don't know. Glass Steagall Act doesn't really deal with the fundamental problem with 2008, which was at its core an error in measuring potential risk of new finantial products. It could have prevented some of the worst impacts of that error, but we're not sure.

Here's quote from former Federal Reserve Vice Chairman Alan Blinder: "What bad practices would have been prevented if Glass-Steagall was still on the books? I've yet to hear a good answer."[1]

You know that saying: generals always prepare to fight the last war.

Finantial Regulations are like that too. We don't know where the next crisis will come from, and so we don't know if we're ready for it.

[1]: https://www.npr.org/sections/thetwo-way/2015/10/14/448685233...

Re: Bank failures come in waves

#128

Post by roenxi »

vishnugupta wrote: post #95

Continuing the theme of the article the current banking crisis has exposed two conflicting functions of money i.e., store of value and a vehicle of investment both of which are facilitated by banks. Keeping money safe, whether physically or digitally, comes at a cost. Banks absorb this cost because they make money through credit creation, maturity transformation, and interchange fees. They even pass on some of that p…

I don't think you're actually proposing anything with that CBDC statement - CBDC doesn't imply any particular policies or mechanisms. It is a non-phrase without a concrete proposal. What exactly is the central bank supposed to do here?

Re: Bank failures come in waves

#129

Post by chrchang523 »

rocqua wrote: post #80
fuoqi wrote: post #68

Earlier quoted context omitted.

You can be your own narrow bank by directly investing into short-term bonds or by buying a money market fund.

That has massive fee friction, does not eliminate counter party risk entirely, and earns different (lower?) rates than the Fed offers.

I don’t know how long this will last, but I started doing this recently with Vanguard’s VUSXX (short-term Treasury) fund when I realized it had significantly higher after-tax yield than high-interest savings accounts without the hassle of manually rolling over T-bills, and it looks like many other people have been moving in this direction.

Re: Bank failures come in waves

#130

Post by drexlspivey »

spacebanana7 wrote: post #109
vishnugupta wrote: post #95

Continuing the theme of the article the current banking crisis has exposed two conflicting functions of money i.e., store of value and a vehicle of investment both of which are facilitated by banks. Keeping money safe, whether physically or digitally, comes at a cost. Banks absorb this cost because they make money through credit creation, maturity transformation, and interchange fees. They even pass on some of that p…

A hybrid solution could be a grade of bank accounts whose deposits are backed 1:1 by short dated government debt. You get most of the safe custody benefits of CBDC whilst minimising the costs of restructuring the banking system. Customers could still use all the same banking apps and branches. Such a program could even be eased in over time by steadily increasing the proportion of bank balance sheets allocated to sho…

You can already do that by buying a money market fund no?
Post reply on HN